Reus Truck Company replaces the tires of its trucks. The new tires have a price of $127,000. The old tires have an original cost of $144,000 and accumulated depreciation of $128,000. Reus gave the old tires and $111,000 cash for the new tires. What is the effect of the entry to record the replacement on total assets?
Multiple Choice
Decrease of $17,000
No effect
Increase of $16,000
Decrease of $11,000
Increase of 111,000
CALCULATION OF BOOK VALUE OF THE TYRE REPLACE | |
Value of the tires of Trucks | $1,44,000 |
Less: Accumualted Depreciation | $1,28,000 |
Net Book value of the assets | $16,000 |
CALCULATION OF NET IMPACT ON TOTAL ASSET | |
Total Assets Given on this purchase: | |
Cash | $1,11,000 |
Add: Reus gave the old tyres also of book value | $16,000 |
Total reduction of assets (A) | $1,27,000 |
In exchange of this Reus is get the new tyres value of (B) | $1,27,000 |
Difference (A-B) | $0.00 |
It menas there is no increase or decrease in total assets | |
Answer = Option 2 = No Effect | |
Reus Truck Company replaces the tires of its trucks. The new tires have a price of...
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